NCLT: Speculative Homebuyer is Not Entitled to any Payment from Corporate Debtor in the name of ‘Buy Back Consideration’
The National Company Law Tribunal (NCLT), Delhi by its division member bench of Ashok Kumar Bhardwaj (Judicial Member) and L.N. Gupta (Technical Member) observed that speculative homebuyer is not entitled to any payment from corporate debtor in the name of ‘Buy Back Consideration.’
In the present case the financial creditors filed the present Petition under the Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) with a prayer to initiate the Corporate Insolvency Resolution Process (CIRP) against the M/s. TGB Reality Private Ltd. (Respondent/Corporate Debtor).
The petitioner submitted that in the year 2015 the Respondent came up with a public invitation inviting general public to invest in BUYBACK Scheme of the Company and also buy apartments which was yet to be developed and it’s lay out was yet to be prepared.
The Respondent, through its Directors and Employees, induced and convinced the Petitioners/Financial Creditors to purchase a Residential apartment under buyback Scheme. The Financial Creditors invested their savings in the Respondent’s Project under Buyback scheme.
The Petitioners had signed a buyback Agreement wherein after 36 months from the date of agreement the Petitioners had option to surrender the apartment and the Respondent could buy back the same. Further, as per the buyback agreement, after the expiry of 36 months from the date of signing of agreement the total amount /compensation given to Petitioners included with interest at the rate of 24 per cent per annum was also to be paid by the Respondent.
The Petitioners after expiry of 35th month i.e., on 24 January, 2018 sent a notice/application exercising their option of Buyback under clause 8 of Buyback agreement dated 4 February, 2015 thereby they could opt for cancellation of allotment and surrender.
The Financial Creditor/Petitioners did neither received any payment nor any response from the Respondent even after passage of long time from the date of expiry of 30 days after the buyback date.
In the wake of the aforementioned, the Financial Creditors prayed for initiation of CIRP against the Respondent.
The corporate debtor in their written synopsis, espoused that the financial creditors had given letter as per clause 8 of the Agreement, only after expiry of 35 months, thus, they were not entitled to any payment from the corporate debtor, in the name of ‘Buy Back Consideration.’ It was further argued that on behalf of the corporate debtor is that the 10% of booking amount of total sale price could be received only after execution of the buyback agreement, thus clause 3 of agreement could be violated.
The NCLT relied on the issue raised in the case Ankit Goyal vs. Sunita Agarwal and Ors. wherein the National Company Law Appellate Tribunal (NCLAT) considered the fact that the Allottee sought benefit from a ‘lucrative Agreement’ as he is ‘securing’ his money by way of this Agreement which gives him a lien over the flat.
In that case, under the agreement, the Home Buyer was given a choice to retain the apartment or to sell the earmarked unit. In a regular Builder Buyer Agreement, the Home Buyer does not have this option of exercising his choice of taking or not taking the possession of the subject unit. In a normal Builder Buyer Agreement if the Buyer does not accept the possession, the EMD is forfeited.
Moreover, in that case, the NCLAT had observed that the Agreement is only a camouflage of actually financing the construction of the flat. Hence, the NCLAT held that the Home Buyer sought to benefit from this ‘lucrative Agreement’.
The NCLT held that the proposition is squarely covered by the Judgement dated 12 August 2021, passed by the NCLAT. Further the bench retaliated that the insolvency and bankruptcy proceeding is not a recovery proceeding.
In this regard the NCLT placed reliance on the ratio of the decision passed by the Tribunal in Binani Industries Limited vs. Bank of Baroda & Anr., wherein it was observed that the IBC is not a recovery proceeding. In fact, the IBC prohibits and discourages recovery in several ways.
Being bound by the aforementioned Judgement of the NCLAT, the NCLT dismissed the petition.